A Day in the Life of Appraising Iowa-Nebraska-Florida


Fannie Mae announces adoption rule of ANSI Z765 residential real estate measuring standards. What does this mean for appraisers and real estate professional? 

Per Fannie Mae Announcement Letter SEL-2021-11.  Lenders may begin accepting appraisals using this standard immediately, but compliance is required for all applicable appraisals with an effective date on or after Apr. 1, 2022.
When I began my appraisal career in 1999, ANSI standards were fairly new to the residential real estate appraisal industry, and were not widely adopted yet by appraisers.  The process for creating a residential measuring standard didn't begin until 1994, and ANZI Z765 was official in 1996.  The standard has since been updated, the latest version is ANSI Z765-2021.  To this day, it is the only nationally recognized standard for measuring residential properties. 

This standard has been "voluntary" for residential appraisers and real estate professionals up until now.  For those who adopted it, it brought credibility when calculating square footage per a national recognized guideline.  Professional organizations have recognized these guidelines since its inception; Fannie Mae, Freddie Mac, HUD, VA, Appraisal Foundation, National Association of Homebuilders, Manufactured Housing Institute, American Institute of Architects, National Association of Realtors, Marshall & Swift Cost Guides and the Employee Relocation Council. (Distinctions of above grade and below grade, are broken down in the Marshall & Swift cost manual, and are consistent with the standard).

A quick summary of general rules and guidelines

Measurements of each are made to the exterior finished surface of the outside walls.  When measuring a second floor from inside the residence, the thickness of the walls is included in the calculations.

Areas protruding from a finished area may be included as finished, provided they have a floor on the same level and meet ceiling height requirements . (A fireplace would not be included in GLA calculations, a bay window could be). A window box, which protrudes from the exterior but does not have a floor is not included as gross living area. 

When finished and unfinished areas are adjacent to one another the finished area should be calculated by measuring to the exterior surface of the inside wall separating the two areas. The measurement of the unfinished area should be from the exterior finished surface of the outside wall to the exterior surface of the inside wall.

Sloping Ceilings and Open Areas; No area is considered “living area” if it does not have a ceiling height of at least seven feet.  There are two exceptions; Areas under a sloped ceiling may be included as living area as long as they have an average ceiling height of seven feet, however no portion of an area that has a ceiling height of less than five feet may be included as finished. (so sloping ceilings with average of 7 feet high and area 5-6 ft high can be included). Exception; Finished areas with sloped ceilings underneath stairs may be counted as finished area, regardless of ceiling height. *See note regarding stairs. 

Areas open to the floor below are not included in the calculated area. So in the case of a two-story foyer, only the actual floor area is calculated.

All area calculations are broken down into the specific levels of the residence, either above or below grade (i.e. first floor, second floor, below grade/basement).  Furthermore, areas must be designated as finished or unfinished.

"Grade" is ground level at the exterior of the residence. For any level of a house to be considered above grade, the entire level must be above ground level. Likewise, if any portion of an area is below ground level, then the entire level is considered below grade. Finished is defined as “An enclosed area in a house that is suitable for year-round use, embodying walls, floors and ceilings that are similar to the rest of the house.”  Also, implied in this definition, is that a finished area will be climate controlled in a manner consistent with the rest of the house.

GLA is understood to mean above-grade, finished area.  It is clearly differentiated from below grade areas and finished below grade areas.
Finished areas not connected to the main part of the house by means of a finished hallway or staircase should not be included as a part of the finished area at the same level.  Therefore a bonus room over an attached garage, a detached guesthouse, an apartment over a garage, etc should be described as a distinct area, not gross living area.

The updated edition of the ANSI standard allows for some decorative concrete floors to be considered finished floors.  Enclosed, climate controlled patios and sun porches may now be included as living area.

Garages, whether attached or detached, are not considered living area because they do not meet the previously stated requirements for finished areas.  The principle also applies to utility/storage areas, decks, open porches and open patios.  

*Calculations for stair area should be attributed to the level from which the stairs descend. This is true regardless of the degree to which the stairs/stairwells are finished. The area attributed to the stairs includes the treads and landings but should never exceed the size of the floor opening. For example, a typical stairwell may be four feet wide where it begins its decent from a second floor.  If the stair flares to six feet wide at the main level and the opening at the top and is no wider than the treads, then only the dimensions consistent with the opening can be used.

Tags: ANSI Standards, gross living area, appraising education, appraiser training, appraisers, cost approach, Employee Relocation Council, ERC, finished, GLA, above grade, gross living area, measuring, standards.